Information and Consulting

Friday, October 29, 2010

Last week I pointed out the number of state agencies and boards that are either indirectly involved or directly control and/or influence the development industry in California. There are over 75 of these agencies. Those, combined with the 59 counties and 478 incorporated cities, form a significant bulwark to mount while trying to move a development forward. While I am a proponent of local control over development it is my impression that these local agencies have now taken on the role of gatekeeper. This reminds me of the bouncer at the head of a line to a night club – you ain’t on the list, you ain’t getting in!

These local planning departments use their home-bred categories to try and slice the planning effort into thin manageable bits as opposed to looking at the whole. And, at the same time, the phrasing for these categories confuses and, at times, alarms the residents. And because there is not a statewide uniformity of these categories that defines and details land uses, one city’s Mixed Use and another’s Mixed Use can and do mean different things. Some communities have more than six levels of multi-family housing based on density, users, and height.

In residential development there are only two basic types of housing: rental and ownership. Within each of these there is single-family and multi-family. These are further defined by whether the residential units are attached to each other or not. From here on it is a free-for-all and confusing miasma of chopping each of the housing types into smaller and smaller bits until we have categories so focused that it is impossible to see their logic and reason. I am working in a community with a hillside ordinance so complex Stephen Hawking could write a paper on the subject.

How should we look at this? Leave it alone? Make wholesale changes across the state? Force counties and communities into a set of rules and land use ordinances? Sounds awfully Big Brother, but as it is said, “We are from the government and we are here to help.” Some direction is needed. Scroll through municode.com and call up any number of cities and review their individual listings for residential districts (or other term). As I said, one city’s horse is another’s camel.

The state has review control and approval for all county and city General Plans. This is required by state law. I would suggest that over an extended period of time, say ten years, that the various codes and categories conform to a standard list of definitions, categories, and district designations. Obviously Modesto would have little need for a hillside ordinance like those found in Woodside, but then again waterfront uses for San Francisco have little bearing in Barstow. Am I stirring up a tempest in a tea pot—probably. But my goal here is to stand back and thin out the costly confusion that is generated by these, and at times conflicting, ordinances and districts.

As we come out of these difficult times we will be faced with the inevitable backlog and pressure to move quickly with housing and commercial development. It is going to happen. My concern is that simple things, like land use categories, will become more and more complicated out of the fear of doing wrong rather than doing right or . . . doing anything at all. Are land use definitions development barriers or opportunities? I fear that they have become barriers in most cities.

The most famous city in America, poster child if you wish, for “no” zoning is Houston, Texas. I am not sure how true this is. The marketplace can and does do a very good job of controlling adjacent land uses. It is hard to sell detached housing next to urban high rise. In fact an aerial view shows that Huston is not unlike others in the United States of the same size and structure. I know we are different and special here in California, but get over it.

I suggest that a simplification is in order. Basic categories that broadly define the land use permitted and then require the proponent to show how they perform in that category. Isn’t that why we have planning commissions and city councils? Unfortunately I also know that planning staffs use these categories to exert their opinions and planning trends into the process and push the newest and latest fad they learned at the last American Planning Association meeting on TODs, TNDs, Greenfields Developments, LEED certifications, and the latest trick: Form-Based Codes. All try to explain and codify the messy process of change and growth.

Much of this process is fee driven and is a source of significant revenues for the various agencies. Just look what has happened to counties and cities during this collapse in the housing industry. No fees plus no permits equals massive staff reductions – or at least in cities that imagined unlimited growth. Witness many Central Valley and Inland Empire communities and their problems.

I will try to delve into this more during my next blog and lay out a more simplified list of categories for land use. It is daunting but then again much of California grew, expanded and prospered over the last hundred and fifty years under far, far fewer controls than we have today.

Friday, October 22, 2010

While preparing for my book tour in Chicago and presentation to the Village of Park Forest, I was again struck with these incredible facts: this village of 3000 plus acres and over 6000 housing units, schools, parks, and seminal commercial center was planned between June 1946 and the first homes occupied in late fall 1948, two years and five months. By 1952, six years after the first meeting, over 20,000 residents called the village home. The world did not end, the forests and wetlands were protected, existing roads were expanded, and a new community was built that provided homes for the jobs that were created in Chicago.

As the economy revives and the opportunities for growth return (California continues to grow regardless of the politically charged demographic numbers), we are not prepared to efficiently and proactively build for the future. This state cannot repair an important bridge let alone plan for the millions of future residents waiting in schools and colleges for new homes and facilities to raise their families. I am involved in communities that are now into their fifth and sixth years of bureaucratic involvement and approvals. Clients discuss, with great hope and trepidation, which economic cycle will they face when they finally receive approvals, finish with the lawsuits, and are blessed by some future housing czar.

All real estate is local – except in our state. Currently the State of California has over 520 caucuses, commissions, associations, departments, divisions, boards, bureaus, agencies, networks, councils, courts, and authorities as well as universities, and the senate and assembly. Within each of these there are innumerable programs and sub-committees. Without expanding or stretching the imagination at least 75 of these agencies have a direct involvement with housing and development within the state. Some have almost veto-like control through the morass of approvals. For your entertainment listed below are these agencies, be advised: each has a director, staff, programs, and attendant consultants in the private side (you can skip it unless you need to take a nap).

Without a doubt some of these are necessary for the future of the state and well managed growth. Some continue to meddle and offer ordinances, controls and “guidelines” that contribute nothing to the efficient course of development in the state. The market does as good a job of determining the quality of a project more than a staffer in some small cubicle in Sacramento.

On top of all these state agencies are the numerous and, many times, contradictory county and city departments and agencies. There are 58 counties and 478 incorporated cities in the state. Each has their own planning department (there are almost as many different names for this particular agency as there are cities, i.e. Department of Development Services, Department of Building and Planning, etc.). And in many of the larger cities affordable housing agencies, transportation agencies, fair housing agencies, park and recreation commissions and who knows what else. Each has put their finger into the pie. By the way did you know there is NOT an approved and required list of land use categories in the state, there is not even a Chinese menu of options. So a horse in one city CAN be called a camel in another. There are hundreds and hundreds of definitions of multi-family housing alone.

And on the federal level, let’s not go there but oh let’s name a few: FHA, HUD, FEMA, Fish and Wildlife, and the most notorious - Corps of Engineers. The Labyrinth of Crete and the corridors of Sacramento have much in common.

While I am no Don Quixote and do not wish to challenge windmills, there must be a better way to move this process forward. There are state mandated timeframes for approvals that even my clients don’t understand – and the cities ignore unless sued. The development community wants to play nice and they bring their own bats and balls (and buckets of cash for fees). The governmental agencies make up the rules as they go along and keep the scoreboard.

I will try and throw out some ideas over the next few weeks and see if there is some possible way through these tunnels and maybe find the Minotaur.

Sunday, October 17, 2010

After looking at the title of this missive I am shocked that I even have a tenth of the expertise to ponder such a thought. Let’s go over my qualifications: homeowner, community planner, urban designer, mortgage holder, and California resident. I do not have banking credentials, a financial resume, or even a minor in accounting. So there . . . I have all the necessary qualifications and maybe more than the usual talking face on the tube.

I just finished reading John Mauldin’s latest newsletter on the current state of banking and mortgages. If I wasn’t concerned before, I am very close to extremely concerned and breathing heavily now. I recommend his weekly newsletter, it is free and worth millions.
(see: http://www.frontlinethoughts.com/printarticle.asp?id=mwo101510)

Without the underpinning of secure titles and mortgage papers there will not be a housing industry. If there is no assurance by a title company that the house and property being purchased has clear title, no one will expose himself or herself to the risk. The banks won’t, the builders won’t, the landowners won’t, and the buyers won’t.

A few months back I wrote about whether the master planned community is dead, I offered that I thought it was. The reasons are numerous and obvious to all in and out of the industry. Now I am concerned that this mortgage mess and with it the attendant foreclosures will lay low the housing industry as a whole for years to come. There are very few adults supervising the children now. Lax management, creative and outright fraudulent banking practices, too much money chasing too much money, and a general “I am in it for myself,” attitude has contributed to this mess. With very, very, few examples most of the players in this industry have contributed to the problems we face today. Builders, developers, bankers, unions, politicians, and even the buyers have all had their collective hands in the cookie jar. The jar is now empty and there is a sharp bear trap on the dark bottom.

There will be a few housing projects that will move forward. Most are urban high-density projects that have some political muscle behind them. They fit agendas and programs created through the particular cities they are in. Salvaged school sites, environmental reclamations, transit oriented communities, and maybe even a few old fashion developments. But large-scale communities with thousands of acres and units are well out of the realm of the possible now. And probably through the rest of this decade; we are reliving the 1930s.

Coming is a time of retrenchment and financial reconstruction on a scale not seen in modern banking and it will be worldwide. This banking rebirth must be based on the underlying principle of property rights and ownership and on the free market exchange of money, goods, and land. If these are not supported through regulation, law and insurance they are meaningless.

As can be seen in the Mauldin article we are in tenuous times and I fear for the whole structure of our industry. The first blog I wrote in early summer dealt with the demise of the design industry and the collapse of architectural and engineering firms. While some still cling to a few projects it is now a war of attrition and survival. This economic disease will spread through the construction industry; few will remain and they will be the very large conglomerates and the very small custom builders.

Look at a house. Walk through a new home (assuming you can find one) and count the industries it took to build, equip, and furnish it. Then multiply those items by one and a half million and you will understand what I mean. We waste our political wind taking about green industries, alternative energies, electric cars, iPads and other distractions. To say our politicians are intellectually lazy would be too kind, these impacts on the banking and housing industry need far more coverage than the sound bites of the foreclosed house sign and the grieving owner. Where are the adults when the sand box needs them?

Sunday, October 10, 2010

Once more into the never ending wonder that is the electric car. I posted, about six weeks ago, two blogs about my take on the vehicle and how the public may receive it. I did not and will not deal with the mechanics or even the whole issue of batteries and recharging and what their real impact is, I leave this to the experts. Remember, it is nothing more than a car with a different and yet quite conventional power source; one that has been around longer than the internal combustion engine – the electric motor. (Oh by the way honey, did you plug-in the car last night?).

What I do object to is how federal and state governments are now the financiers and marketers for this form of transportation. Besides being involved with the ownership of GM, governmental agencies dangle freebies to the market in an unabashed effort to prevent their failure.

In an article in the NY Times on Thursday it was laid out simply for all to understand. These incentives include for the Nissan Leaf (due in December): a $7,500 federal tax credit, a $2,500 cash rebate from the state of Tennessee if you live there (in California you will receive a $5,000 tax credit). Also, in many states, they will install, at no cost, a home-charging unit provided by the Energy Department (some provide tax credits for this). By the way you cannot just plug this baby into your toaster outlet – it feeds on 240 volts and it will require you to rewire your garage.

These cars are not cheap, the Leaf starts at $32,780, the Chevy Volt $41,000, and for the racy Tesla Roadster – north of $100,000. These prices are well inline with the gasoline market and I am sure they will be physically worth the price. They will have leather options, cool cup holders, a jack for you iPod, and maybe even a back seat (except for the Tesla). And don’t worry about the noise issue, gas cars are so quiet now they can sneak up and bite you even with their conventional motor.

But why are our governments in the car business? The rationales include saving us from the oil companies, cleaner air, the environment, and jobs. All well and good; I certainly would rather leave the hundreds of billions in dollars we spend for fuel here at home than send it to folks who really do not like us.

The urban environment would benefit. There will still be millions of cars on city streets but they will reduce particulates and carbon dioxide by significant amounts. We will all be happier as we go to jobs in our electric mix-masters while we save the environment.

But what about apartment complexes and condominiums, how in the world will these electrical systems be integrated into this market - an important customer base? Imagine trying to rewire and accommodate these facilities. I can just see the association meetings, who is to be first and who is last. It will not be pretty and it certainly will not be cheap. I guess the gov’ment will just have to help. And what about the work place, who will cover that? (I am beginning to sound like Andy Rooney, one moment while I slap myself.)

For a product to be successful the market has to embrace it. The product must meet demand (real or perceived), be affordable to enough buyers, tease others to follow, and be profitable. The last is the most important. With all this government meddling how can the manufacturer even understand the real market and the profitability of its product? A recent affect of this governmental diddling can be seen in the credits offered to first time homebuyers. The sales dropped through the floor after these “rebates/discounts” were dropped. Homebuilding is one thing – billions in manufacturing plants and jobs is another.

The electric car is a palliative. It is a trophy to be driven, proving the driver’s worth and social concern. It is also a provocateur; it will roil the social and economic structure of the country. Is it for better or worse? This remains to be seen. But to be successful it must be profitable and that is still hidden in the fog.

Friday, October 1, 2010

I attended a neighborhood meeting last night sponsored by the county traffic agency, even one of our elected county supervisors showed up. Their intent was to find out our neighborhood’s needs and desires to improve safety and circulation. I think they hoped if they had a couple of dozen neighbors show up it would be great meeting, instead probably more than 200 attended to voice their concerns — it both impressed and shook the county staffers.

Background: Our little piece of the American dream is 20 years old, we designed it and it was constructed by one of the best builders in this part of the state, a half-acre of heaven sitting with hundreds of others in a donut hole of county jurisdiction, surrounded by Walnut Creek, California. Every vote to annex into the city has been turned down. Why is another matter for another time.

For this privilege we sit along narrow county roads that both bypass and lead to the town center. We revel in our country roads, no curbs, large lots and idyllic life. That is until the freeway backs up and then we become a conduit of excessive traffic trying to find a short-cut to wherever. This is simply a result of development and growth, not in our neighborhood, but elsewhere.

We are not unique or special. This is happening everywhere. Our heavenly donut hole is found in every expanding community across the country. We are the drive-through (instead of fly-over) bits of the American dream. And I honestly don’t know what the answer is. To improve the streets and add the shoulders for bikes and pedestrians (no one wants sidewalks) will take portions of some lots and increase speeds – and while improving traffic flows, most of residents reject this because of very real safety concerns.

I bring this up because this is what is confronting city planners, developers, and designers of infill neighborhoods. Existing streets and utility systems were designed for one development density and pattern then changed to denser neighborhoods that may be three or four times the number of units of the older community. In some cases, such as mega-apartment complexes, it may be 50 times the number of units. These existing systems have great difficulty in dealing with these “improvements.” The builder may replace nearby stoplights and add a few signals - even widen the streets. But often it is these other neighborhoods, sometimes miles away, that are also affected by the accumulating growth. Impact fees can be collected – but money does not necessarily solve the problem or the physical impact.

This is not just a traffic issue; it is also a very expensive utility problem as well. Three old houses are taken and replaced by 50 apartments. You can imagine the impact on water mains and sewers, streets are opened and lines replaced, sometimes in the case of huge developments, for miles.

I realize that this is a bit of a rant (I sound like some of the residents last night who just didn’t understand the why of it), about growth and density. I have had a great career doing exactly this elsewhere, it now coming home to roost. I realize all too well that there is no simple answer.

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About Me

Greg was born in 1949 in Traverse City, Michigan. Raised near Chicago he moved to California in 1971. The son of a journalist and entrepreneur, Greg has never forgotten his roots; his non-fiction work has focused on the Midwest region. Californian by choice, Mr. Randall makes his home in Walnut Creek, California with his wife, constant companion, and business partner. His preferred fiction genre is mystery/thrillers and historically based novels.